Navigating the Shifting Tides of Scholarly Publishing: Investment Opportunities in a Post-Funding-Cut Era

The scholarly publishing landscape is undergoing a seismic shift. As federal research budgets shrink and artificial intelligence reshapes workflows, investors must navigate a complex terrain of risks and rewards. Let's dissect the data and trends shaping this industry—and where to place bets.

The Funding Cliff: NIH Cuts and Their Ripple Effects
The National Institutes of Health (NIH) faces proposed budget cuts of up to 43%, a seismic event for the $35 billion academic research ecosystem. Delta Think's 2025 survey of 13,246 researchers reveals stark consequences:
- 60% of health/life sciences researchers anticipate reduced publication output.
- Peer review backlogs could grow as mid-career scientists—disproportionately affected by grant reductions—divert time from reviewing.

For publishers like Elsevier (part of RELX Group, REXL) and Springer Nature (SNVP), this spells dual challenges. Fewer manuscripts mean fewer submissions, while shrinking institutional budgets strain journal subscription models. The data query below highlights RELX's vulnerability:

APC Pricing: A Balancing Act Between Inflation and Access
Article Processing Charges (APCs) for open-access publishing rose 6.5% in 2025, with hybrid APCs increasing 3%. Yet currency fluctuations have introduced volatility: a weakening U.S. dollar made non-USD priced APCs 6–31% pricier for American institutions. This creates a paradox—publishers must hike prices to offset inflation while avoiding alienating cash-strapped researchers.

Investors should watch Emerald Publishing and Wolters Kluwer (WKN) for their exposure to APC markets. A query on Wolters Kluwer's quarterly revenue by division could reveal how their health publishing arm is faring:

AI's Double-Edged Sword: Risk and Reward
Contextual inquiry reveals researchers are adopting AI tools for drafting manuscripts, analyzing data, and even automating literature reviews. Yet 40% of users in Delta Think's study expressed ethical concerns about AI-generated content. This creates an opening for companies providing audit-ready AI solutions, such as Palantir Technologies (PLTR) or niche players like Aleo Systems, which specialize in academic compliance tools.

The risk? Overexposure to unregulated AI could backfire. Publishers lacking robust ethical guardrails may face reputational damage—a lesson from ChatGPT's early plagiarism controversies.

The Books Program Pivot: A Hidden Gem
While journals dominate headlines, book publishing—often overlooked—offers stability. Delta Think's research shows researchers still value monographs for deep dives into topics like AI ethics. Publishers like Cambridge University Press and SAGE Publishing are leveraging AI to streamline peer review and personalize content delivery.

Investors should favor firms with hybrid revenue streams. For example, Taylor & Francis Group (TFC)'s mix of journals, books, and open-access services provides diversification against single-sector volatility.

Investment Strategy: The Three-Pillar Approach
1. Defend Against Funding Cuts:
- Short RELX and Springer Nature if NIH cuts materialize faster than anticipated.
- Hedge with iShares U.S. Medical Devices ETF (IHI), which benefits from NIH's shift toward clinical trials over basic research.

1. Bet on APC Resilience:

2. Overweight Wolters Kluwer if institutions prioritize OA publishing despite budget strains.

3. Embrace AI Ethically:

4. Long Aleo Systems or Palantir if they secure contracts with major publishers for compliance tools.

Conclusion
The scholarly publishing sector is at an inflection point. Investors who blend macro insights (NIH funding trends, APC inflation) with micro analysis (publisher diversification, AI adoption) will thrive. The winners will be those who balance growth in AI-driven innovation with resilience against fiscal headwinds—a recipe for outperformance in this evolving space.

Investment thesis: Overweight niche AI compliance firms; underweight pure-play journal publishers until funding clarity emerges.